What are Retained profits?why are they highly regarded by management as a source of funds?

Question

What are Retained profits?why are they highly regarded by management as a source of funds?

Answer 1

retained profits or earnings is the accounting terminology for undistributed profits which is grouped as shareholders' equity. It is not necessarily in the form of cash. It can be in the form of other assets such as receivables, inventories, fixed assets, etc. So if management of a company wants to use it for say paying devidends, they must liquidate non-cash assets into cash. In short, "source of funds" is also an accounting terminology, not necessarily means cash that is ready to be used.